Intelligent Investment
2024 U.S. Life Sciences Outlook
Industry Innovation to Thrive Despite Cautious Capital Markets
January 8, 2024 28 Minute Read
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Despite Headwinds, Life Sciences Industry Poised for Growth in 2024
The life sciences industry is fueling business growth and real estate demand around the world, and 2024 will be no exception. Advances in biotechnology, medical devices and consumer products are focused on unmet medical needs and advances in sustainable materials. While the past year has been hard on the small-cap biotech industry, life sciences stock indices such as XBI and NBI showed noticeable improvement in late 2023 in line with the S&P 500 and Dow Jones Industrial Average.
Like many industries, life sciences is facing external headwinds in 2024, including high interest rates, a slowing economy and geopolitical conflicts. Nevertheless, life sciences industry fundamentals remain solid, with good prospects for recovery when these headwinds recede. Given the conditions on Wall Street and in the venture capital market, many life sciences companies are emphasizing capital preservation with a more conservative investment approach.
We trust you will find CBRE’s 2024 U.S. Life Sciences Outlook report helpful for your planning and investment. If you have any questions or would like to explore what these market drivers mean for your business, please contact us at any time. For more information on CBRE’s Life Sciences Practice, please visit www.cbre.com/lifesciences.
Matt Gardner
CBRE Life Sciences Advisory Leader
Insights from the Life Sciences Outlook Expert Roundtable
This event reviewed key findings of the 2024 U.S. Life Sciences Outlook report and Q4 2023 U.S. Life Sciences Quarterly Figures, followed by a panel discussion with speakers from BioPharmCatalyst and CBRE covering trends in the life sciences industry, including the FDA approval pipeline and the pace of scientific discoveries, and the impact they have on real estate markets.
Speakers
John Gagliano, Director, BioPharmCatalyst
Ian Anderson, Senior Research Director, CBRE
Matt Gardner, Americas Advisory Leader Life Sciences, CBRE
Executive Summary
- Artificial intelligence could accelerate revolutionary advancements in U.S. life sciences this year. U.S. clinical trials of drugs should continue at record levels, as FDA approvals of novel drugs in 2023 neared the second-highest annual total over the past 25 years.
- Industry partnerships, licensing agreements and R&D expenditures, as well as government funding and philanthropy, will stimulate growth despite high interest rates entering 2024.
- The nearly $18 billion in life sciences venture capital funding for the year ending Q3 2023 was down by 46% from the peak annual total of $33 billion in calendar year 2021. The IPO market also remains relatively inactive. This sluggish capital markets activity has lowered demand for lab/R&D space, with negative net absorption of 1.5 million sq. ft. in Q3 2023.
- It’s unlikely there will be enough demand in 2024 for the nearly 38 million sq. ft. of new lab/R&D space currently under construction. While the potential for oversupply is greatest in Boston-Cambridge, the San Francisco Bay Area and San Diego, supply and demand should remain more balanced in the 10 other primary markets tracked by CBRE Research.
- The balance between lab/R&D supply and demand in 2024 could improve if venture capital funding increases. Expectations that the Federal Reserve will cut interest rates may spark some transactions that have been delayed in recent years.
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